The proponents of the CT approach eg. Kapur et al, argue that most IKTs have failed to deliver simply because their implementation requires active involvement of the public administration, which is generally unaccountable to people and is marked with weak capabilities at the local level.
In addition, other criticisms against IKTs include various forms of corruption and leakage, supply of substandard quality, and to the extent local governments are involved, political bias in distribution. The supporters of IKTs, on the other hand, point out a large number of disadvantages inherent in a CT programme — misuse of money, price fluctuations in the underdeveloped rural markets, greater vulnerability of women and elderly — and argue that reforming the existing programme is a more sensible approach than replacing it completely with a CT programme Khera, ; Ghosh, ; Shah Unfortunately, the debate is becoming increasingly polarized, and the tendency to argue either for or against the cash transfers has diverted attention away from understanding the reasons as to why a particular transfer programme works or fails in a given context.
Cash transfers sometimes drive prices up by trying to satisfy a demand without increasing the supply. Cash transfers also prove useless in areas devastated by natural disasters or war, where markets are in disarray or destroyed completely. In-kind benefits allow governments and donors much more control over what types of benefits they give. An individual or organization may choose to provide food, shelter, medical assistance, tax preparation help or any number of services and can do so knowing that recipients got exactly the type of help the donor meant to give.
In-kind services are also adept at meeting a need or demand by increasing the supply without causing price increases. In fact, a study of in-kind transfers found that they decreased prices in a given community by 4 percent. Logistical issues create one of the biggest negatives for in-kind benefits. Delivering tangible goods requires paying for the goods themselves except in the case of donations and then paying to transport them. Goods also require storage while awaiting distribution and in some cases, such as food or medicine, may spoil or expire before distribution.
In-kind benefits also place limits on recipients. While assistance providers see controlling benefits as a positive, recipients often disagree. A family in need, for example, may choose to forgo purchasing food and instead opt to buy medicine for a sick child. Cash transfers allow for these types of decisions, but in-kind benefits do not.
Cash transfers also allow a family to choose what foods they buy, making it easier to work around allergies or special dietary needs. A recipient who uses cash in a way other than the giver intended isn't necessarily making a bad choice.
Michelle earned her accounting degree summa cum laude and has extensive experience in business management and accounting. By giving in-kind transfers, governments specify how individuals must use public assistance dollars.
For example, Stafford student loans can only be used to finance college education, and Medicare benefits only cover the medical costs of those who are taking care of their health. The major benefit is that the program administrator can be certain that the benefit is used for the purpose for which it is meant.
Nevertheless, the vast majority of federal and state assistance programs are in the form of in-kind benefits. Through various pieces of research, economists have consistently found that cash transfers make the recipients happier than in-kind benefits.
A lot of this is due to freedom of choice. An individual who receives unemployment benefits, for instance, is free to spend that money in any way, whether by defraying immediate living expenses or by investing the money. Some economists also feel it is more efficient to give cash directly to families and let them choose precisely which goods and services they need most.
Janet Burt has written professionally for more than 20 years, specializing in business, careers, healthcare and the arts. At the center of everything we do is a strong commitment to independent research and sharing its profitable discoveries with investors. This dedication to giving investors a trading advantage led to the creation of our proven Zacks Rank stock-rating system.
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